Retirement Planning explained
“ Our job is to offer you, as a client or potential client, a service of the highest possible standard delivered by high calibre people with expertise and integrity. It is as simple as that ” Jonathan Wragg, CEO
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Put simply, Retirement Planning is about
how you look at the future. This can be
the immediate future or a future a long way
off, and it is about how you structure your
financial affairs in the context of this.
From a money point of view, it is how you
ensure you have a source of income when
you retire, and ideally how you keep access
to some capital. It is about how you blend
together your various ‘pots’ and try and make
them last.
From a personal point of view, it is a chance
for you to focus on how you want to spend
your time now if you are already retired, or in
the future if you are still working. It is about
understanding where you might need to
make compromises, or being empowered
through proper planning to know you can
spend and do more with your time because
you actually do have ‘enough’.
Introduction
The concept of an ‘ageing population’ may
feel overused, but the fact is that advances
in medicine and generally improving living
standards are combining to increase how
long we can expect to live.
The Office of National Statistics (ONS) has
predicted that nearly 30% of babies born
in the last few years will live to be 100.
And somewhat controversially, there are
scientists now predicting that the first person
to live to 200 has already been born.
We realise the likely maximum age of an infant
born now is not directly relevant as you read
this brochure, but the principle of needing to
be open-minded about how long we might be
retired is paramount.
The backdrop to this is a tightening of the
welfare state, including the basic state
pension. We need to make our own
provision if we are to have any chance of
a comfortable retirement.
What is the reality?
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“ A 20, 30 or even 40 year long retirement on less than the Living Wage is not a particularly tantalising prospect ”
Why are these two figures important?
Well, the figure on the left is the predicted
predicted full State Pension from 2016; and
the other is the approximate weekly pay on
the ‘Living Wage’ – a concept supported by
the major political parties which may or may
not find its way to becoming a legal minimum.
A 20, 30 or even 40 year long retirement on
less than the Living Wage is not a particularly
tantalising prospect – which is why it is one of
the main reasons we help people plan for a
more fulfilling retirement.
We believe these two figures put things into context:
£148.40 per week from 2016 £265.00 per week maximum
Do I need a pension?
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Well, no as it happens – you don’t; but you
do need an income when you or your partner
stops working.
A pension is a financial product which is
designed to deliver an income in retirement,
but as you may have seen in our ‘Financial
Planning explained’ brochure, we believe
that whilst products may be the pieces in the
jigsaw, they are not the big picture.
Even if your own retirement picture is already
clear in your mind, the component pieces
need to be fitted together properly if you are
to complete the jigsaw.
Pensions, ISAs, investments, property,
national savings, bank accounts – they can
all play a part in a retirement plan.
So we advocate a blend of products
as the most likely recipe for successful
Retirement Planning.
Timescales and inflation
As discussed elsewhere, time in retirement
can be much harder to quantify than time
until retirement. Whatever the figure, inflation
is a serious threat and needs to be factored in.
Very often, the concept of planning, whether
focused on retirement, estate planning or
specific investments, is about understanding
what you can control, and what is outside of
your control.
Maintaining Purchasing Power
Inflation is one of the factors that you cannot
control, so you need to make an allowance
– it is unlikely to be going away.
What matters most is what your money can
buy or do for you, not its value on paper.
Inflation has averaged 4% a year since 1925*.
If this continues, it will mean that if, for example,
in 2012, you had needed £50,000 a year to
maintain your lifestyle, this will have to rise to
£111,223 to make sure you can still buy and
do the same things in 20 years time.
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Y/Y Growth (RHS) Total Revenue $bn
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2008 2009 2010 2011 2012 2013E 2014E 2015E
£0
£40,000
£80,000
£120,000
£160,000
£200,000
2042203720322027202220172012
£165,886
£135,832
£111,223
£91,073
£74,573
£61,063£50,000
£0
£40000
£80000
£120000
£160000
£200000
2042203720322027202220172012
Estimate based on 4.08% rate of inflation.
*Source: Thomson Reuters, Global Financial Data, Inc.; as of 18/01/2013. Based on UK Consumer Price Index 1925-2012.
The Retirement Planning process
We will then help you prioritise, outline the
challenges ahead, and talk openly about the
costs. The final stage is then to deliver our
fully considered recommendations in the form
of a written report, which will form the basis of
your own retirement plan.
We will use our expertise to help you
understand your own situation, because
only then can you start to talk about what
you want and need in order to form your
retirement goals. When we know these,
we can identify how close or not you are to
achieving those goals based on your current
planning and any products you own.
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When would you prefer to retire?
Evaluate your current financial position such as your assets, liabilities and current and future income expectations
Establish what level of income you will need at retirement and going forward
Factor in any one-off lump sum requirements in retirement (new car, weddings) or windfalls such as downsizing or inheritances
Visualising
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This is a more detailed and interactive level of
analysis which can really help identify times in
the future where income could be insufficient,
or conversely where income looks to be
comfortable. This in turn can lead to more
confidence to undertake Estate Planning,
for example.
Seeing visual representations of numbers and
your progress against targets can be incredibly
important. We can work with you to produce
a range of ‘cash flow analysis’ reports.
Cash flow analysis – example
£
Years
How can Investec Wealth & Investment help me?
on your lifestyle and may require changes to
your financial strategies and goals. As taxation
rules and other legislation are continuously
changing, we will also ensure your plan
remains up to date and keep you informed
of the changes and new opportunities.
Our financial planners are highly qualified
with many having achieved the status of
Chartered Financial Planner.
Whether building a financial plan with you
from the start or reviewing your existing
arrangements, we can provide impartial
advice to help guide you through the process
to defining your goals and recommending
a tailored strategy to meet your individual
needs that will be flexible enough to adapt
as your life changes.
Ongoing reviews also allow us to help you
avoid hazards which will inevitably appear.
Such hazards can result in expensive or
frustrating mistakes due to poor tax-planning,
missed opportunities or emotional bias that
can negatively influence your decision-
making. Sometimes, just the speed at which
you can react to change can be important,
so having us with you as retained advisers
can help here too. Very often, we can also
suggest strategies for reaching your goals
that you might not have considered.
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Importantly, Investec Financial Planning
delivers independent advice. This means
we offer unbiased and unrestricted advice
and recommendations covering the whole
of the market.
We believe that starting each relationship
with a blank piece of paper and no products
to sell is the best way to deliver professional
and comprehensive Financial Planning.
Once we have implemented your personal
financial plan, we will continue to develop our
relationship with you. So much of Financial
Planning is about mutual trust and respect,
whether in the context of helping you invest
for the future, protect your family or reduce
taxes. We understand that the topics we
discuss can be sensitive, and the questions
we ask can be probing, but the motivation is
to make sure we look after you.
We believe in working in collaboration,
but also appreciate that this sometimes
takes time. Being part of your existing team,
or building one around you where you
also need legal or complex tax advice,
is important to us.
Changes in your personal circumstances such
as marriage, divorce, retirement, death of
loved ones and inheritance all have an effect
Do you already work with Investec Wealth & Investment?
If you already work with us on the investment
management side of Investec Wealth
& Investment, we provide an integrated
approach to wealth management and can
recommend and instruct changes to your
portfolio risk level or investment mandate
where necessary. We can still, of course,
recommend and implement alternative
strategies, perhaps in relation to tax planning,
for example.
Do you have a relationship with another investment management firm?
If, however, you have an existing relationship
with another investment management firm,
our independent status means we can still
provide professional Financial Planning
alongside your existing portfolio management.
Is all this new to you?
Finally, if you are new to wealth management
we will help you choose the correct
level of service and where applicable,
a specific investment manager or firm to suit
your circumstances.
Contact us
If you would like to arrange an initial meeting,
at our cost, with one of our financial planners
please call your local Investec Wealth &
Investment office – contact details are on
the back cover. Alternatively, please visit our
website and request that one of our financial
planners gets in touch with you.
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Planning for retirement
We will be very happy to help:
· Establish your goals and priorities
· Review your existing pensions and
investments
· Set up new pensions and investments
where needed
· Calculate expected future income and
how much you might need to save
Planning in retirement
We will be very happy to help:
· Establish your goals and priorities
· Structure effi cient income drawdown
from pensions and/or investments
· Demonstrate the longevity of any existing
arrangements
· Demonstrate the extent to which you
may be able to undertake Estate Planning
Planning ahead
Please take our card
by way of introduction.
The information contained within this brochure does not constitute financial advice or a personal recommendation. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. References to taxation are based on our current understanding of the legislation but we do not represent that it is accurate or complete and it should not be relied upon as such. Tax laws are subject to change.
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Member firm of the London Stock Exchange. Authorised and regulated by the Financial Conduct Authority.Investec Wealth & Investment Limited is registered in England. Registered No. 2122340. Registered Office: 2 Gresham Street, London EC2V 7QP.IWI889 v1 01/15